Hey romikow here we've got to talk about the cpi data release and expectations and potential reactions or trades for it right now, but first we need a message from max who's going to give us a little bit of a preview for what to expect is cpi going To come in high or low high, oh with the max indicator. Oh oh! Oh! It's! The max indicator all right max! Where are stocks going to go to the moon? You rock max, or i will be like this to the moon. Well, welcome back now. Let's get to what the economists think is going to happen, so here we go first, let's break this down.

The economists believe that we are going to see month over month. Inflation come in at a point, eight percent rate. Now it's important to know that this is a snapshot, a speed. It is not a measure of distance traveled.

It is not a measure of how much inflation will be over the entire year, but it tells us the speed of how fast we're traveling and if things stay at that level, then we could see whole lots of inflation and then we get into exponents in that And the reason i'm bringing this up is because what we like to do to measure the speed is, we simply take this number and multiply it by 12. This is called annualizing, a monthly data figure. It's very, very common. This figure means that the annualized rate of inflation is actually 9.6.

That's pretty substantial, that's pretty dang freaking high! Now that is the month over month, piece and, in my opinion, the month over month. Piece is a very critical piece because it is what federal reserve board members look at for changes or inflection points in the data. Remember folks - and this is so critical to understand that if we have a chart of cpi data and we look at cpi data as okay - we're at one percent we're at one percent and then all of a sudden. We see this sort of inflection point up which is kind of what we're seeing here.

Each time we get a measure. Sometimes we can actually get what starts looking like a flattening like this, when we are right here, but we won't notice it on the year-over-year data until we actually get into hindsight looking at the measure, maybe three four six months a year later. The reason for this - and this is why, the month over month, data is so impactful - is, if we zoomed into this little spot right here, and we said that oh my gosh, inflation has gone from a year-over-year figure of 7.9 here and then a few months later. Over here it's higher, but it's you know, 8.5 percent, because it's higher along the curve.

It doesn't necessarily tell us anything about the trajectory of inflation right. But if we blow this little box up, we drew here and now we just get to something that looks a little bit more like this. If we look here - and we see wait a minute right here - we had month over month inflation, the speed we were going at was something like point, eight percent or worse point: nine percent. Oh no, we're accelerating! Oh, my gosh, one percent holy smokes we're going so fast and then all of a sudden we get a measure like 0.5 or 0.4 and then we start seeing this kind of slower speed.

Then that can oftentimes be a signal to us that the annual inflation to come will be slower, so really the month over month is just a tool just a quick way for us to look at and understand. Aha things are actually slowing down. Now. Nobody actually thinks things are going to slow down, we'll understand these expectations as just a moment here.

Nobody actually expects things to slow down, probably until at least may or june. At this point, so this throws a little bit of salt on this report, specifically because the shock in oil prices and gas prices and food prices for volatile commodities, like wheat, soybeans coffee, you name, it input costs for producer price inflation. These actual data points won't really be picked up until we actually do the snapshot of our march inflation. Well, today is march.

9Th tomorrow is march 10th and march 10th marks the day that we're going to look backwards at february inflation and any volatile forms like commodity prices. Wheat oil, gas are going to actually be divided into three categories: sort of three snapshots of the month. They'll take the average, and the point of this is to say that if prices of oil and gas and food skyrocketed the last week of february and in march this report, that's coming out tomorrow, isn't going to actually incorporate the big damage. Yet it's going to incorporate some, but it's not going to tell us the worst yet.

Instead, the april data set will be a lot more important, because that'll give us a look into what march's inflation was like. That april could end up being a peak assuming war. Has hopefully by then ended if it hasn't, then the peak of inflation could end up rolling out to may june or potentially longer we'll see. Now there are two types of inflation, and this is also important to know, because when we go into the data set, we got to be able to parse this out.

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This is sort of part one of inflation. This is the i like to call it the old, transitory type and the new persistent type, so the old, transitory, new, persistent right. This is the stuff like the used cars, the supply chain issues, the pretty much broad-based inflation that we've seen, because people have so much more money, there's so much more wealth, so much more savings people are paying more for houses and real estate and rent uh and Apparel and air travel in hotels and airbnb's, you name it. Everything is getting more expensive.

So this is the old transitory, which the federal reserve has dumped the phrase transitory and now because it's no longer transitory. What are we doing? We are basically saying yeah, it's persistent, but eventually it'll go down, and the federal reserve mostly believes that this will will start seeing a decline in this old, transitory inflation sometime between june 30th and december 31st. This is known as the 2h or second half of the year. A lot of companies agree with this, though some companies say it's probably not going to be until the start of 2023 that we actually start seeing some of these pricing pressures come down, so we could be dealing with these higher levels of inflation for quite a while And that's exactly why, when we look at the s p, 500 or the nasdaq, which an easy way to do this, you don't need any major fancy charts to do this, just go to finance.google.com and type in spy.

You go ahead and type in spy year. To date, what do you get year to date, a decline of 10.53 of the spy you want to compare that to the qqq boom, just click it right there, qqq, unfortunately, down 16.6 percent, want to compare it to some other stocks. There are great ways for you to be able to do this just by hitting the add comparison button we'll throw in tesla here we'll throw in apple and why don't we just throw in rk for giggles here, and so you can see here, tesla down about 28. So underperforming the indices apple outperforming the indices and arc also underperforming.

Just a quick example right, but going back to the cpi data set markets, are already pricing in a lot of fear that the first form of inflation is going to take longer to handle the federal reserve originally looked like they were planning to rug, pull us and Give us some form of a 50 basis, point hike or shock rates up to one percent, which sounds insane because they're already so close to zero, like what's one percent, it's still actually accommodative, but that could have likely shocked markets and we would almost certainly see substantially Newer lows: now the federal reserve has promised us they're going to look at multiple reports and they're, not just going to look at one-off high reports because of the game-changer of war and they're going to be a lot more patient. That, in my opinion, again also throws salt on this report, because now we have a new style of inflation. That comes up, and i call this the second form of inflation. The second form of inflation is what i like to call the new, transitory inflation, and that has to do with oil, gas, wheat, certain commodities and certainly food.

Now this is a problem. These these things affect a lot of people throughout the world, especially those least able to pay for more expensive food or more expensive gas, specifically people with lower incomes. This is a problem. The new, transitory inflation is absolutely problem, but we expect that new, transitory inflation will eventually go away as war either war fear goes away or the war resolves itself at the same time as war resolves itself.

We would hope that the old, transitory inflation can also go away as supply chains resolve themselves. Nothing's changed here. A big thing that has changed in recent weeks was that the federal reserve has said we will be very patient and diligent about looking at these reports and making sure that we don't just throw our hat in the ring based on a single report that comes out. We're going to look for the data over the next three to six months, to evaluate whether we need to essentially rug pull markets and go for shock in awe, raise rates to get rid of this inflation potentially force a recession or, if they're, right and the old, Transitory is indeed turning out to be transitory and the war transitory is also turning out to be transitory.

Of course, if both of these end up being wrong, then we're in for a poop show - and you probably don't want to be in equities at that time. Now, let's get to the actual estimates again right here so here are the estimates we're expecting that point, eight percent on the month over month. The range here is anywhere between 0.5 on the low side and one percent on the high side, and the midpoint is really where most people seem to be voting. Most of the economists are voting somewhere between 0.7.9.

This means that, in my opinion, i would not expect much of a dramatic movement in the stock market. If we get anything between the 0.7 to 0.9 range, i don't think we're going to see much of a move in the stock market. I also do not believe we're going to see much of a move in the stock market if we get any headline number between 7.8 and 8 7.9 is the current estimate for year-over-year inflation and year-over-year minus food and energy is estimated to come in at 6.4 with A similar range somewhere between 6.2 and about 6.7, so anything in this sort of mid-range likely to be relatively benign. Usually, where we see markets react substantially is when we get some kind of real crazy shock to one side, and so a crazy shock to one side would usually be outside the range of anyone's estimates.

So, for example, if we get a month-over-month rate of inflation at let's say 1.2 percent, i would expect risk assets to sell off crypto tech. I would expect yields to actually go up now. Those don't necessarily have to correlate, but those two things could happen. I would expect more of a risk off momentum and potentially a little bit of a flight to safety, which right now has been the crowded trade of commodities.

I think that trade is a little overcrowded and it's something that i'm staying away from. I don't know that we're going to see this, but if we do see this personally, i believe it's going to be a buying opportunity, because this report is generally used as a weapon for predicting what the federal reserve is going to do, and the federal reserve has Already told us they're not so worried about bad, one-off reports, so if we get a dip tomorrow, in my opinion, this is a boy opportunity. If we end up seeing something to the low side, which i think is highly unlikely, we probably won't actually see much because a lot of, in my opinion, the potential badness of this report is being priced in. Getting a good report is unlikely to mean that the federal reserve is not going to raise rates, it's still going to bump them 0.25 or 25 basis points.

But a really bad report over here is going to mean the market starts pricing in that fear again, and then we start seeing those uh fears again rise of a 50 basis, point hike that shock and awe. So really, the report tomorrow, in my opinion, creates the potential of a buying opportunity if it doesn't create a buying opportunity uh well, first of all, if it does create a buying opportunity, i would expect futures are going to look a lot like this or the pre-market. You get the report come out. If it comes in higher than expected would not be shocked if we see sort of a v shape down and then that v shape up again.

Really, i think, the market's going to heavily discount this report later in the day that there could be some initial sort of algorithmic trading. That could be an opportunity to buy the dip on year over year. Again, we would probably have to have some kind of crazy shock like an 8.5, to really see a lasting dip. If we do get numbers like this, which these are going to be headline news items for thursday and friday for the mainstream media, and so there could be some red both thursday and friday, as people get freaked out.

Oh my gosh. Inflation 40-year highs all this bullcrap. Whatever we get it, we got it, but what really matters out of this is that the fed uh and their response is going to be limited and, in my opinion, not based on this report at all. This is not to say that i don't feel bad for individuals who have to pay higher gas or higher rent.

That, i think, is a problem, but i do not think that it is any any kind of bad signal for the federal reserve now, in my opinion, if we do end up getting substantially low inflation - and this is where it gets really interesting in specific categories, then There could be opportunities for us to buy the dip as well see really what i'm going to be looking at is not over. Here, i'm not going to be looking at food because that's all going to get destroyed next month when we get the marched out, i'm not going to be looking at energy because that's all again also all going to get destroyed next month. When we get the march data thanks to war, i'll tell you what i'm going to be looking for, i'm going to be looking for declines over here in new and used vehicles. These have about a four and a half to five and a half percent weight each.

So combined you're, looking at about nine percent of cpi right here, new use new vehicles and used vehicles. Last month we actually saw the monthly rate of change for new vehicles at zero percent and the monthly rate of change for used vehicles at 1.5, which is a little elevated. That's that's quite substantial, and so we want to see those numbers potentially go negative. That would be great if they continue to stay high.

That means that persistent inflation is staying around longer and it's not so bullish, shelter and energy shelter over here, specifically rent of primary residents. This should really be going up. It is such a lagging indicator. It should be around one percent, and so i wouldn't be surprised to see that rate rise substantially and if it doesn't rise, it just means it's kind of kicking the can down the road more and it just takes more time to get there.

The other areas that we want to pay attention to are this broader section here of services, less oops services, less energy right here came in at 0.4 percent last time. We really want to make sure that this does not take off if services start taking off. It's actually a hidden boogie ban, because that could mean that that persistent inflation is seeing its way through the uh, the services industry, and that is my friend's bat. The medical services industry is just a sort of another byproduct of the services, as well as transportation services.

These are things to pay attention to transportation. Services have been running hot uh, and this makes sense freight all worker shortages. The input costs make sense. We could also look at airline fares and we can look at travel, which i would expect that certain travel sectors are going to be pretty dang hot.

You could look at furniture as well just to see how individuals are spending apparel, and these are going to be the more sort of uh detailed sections that when you get into them, the point of them is really just to see. Okay, what do we think individual consumers are doing? Because if demand goes down in apparel, let's say substantially we're going to see lower month over month? Price increases because well, businesses are very quick to adapt and if they start seeing demand go down, then we'll start seeing those price increases go down. The rate of increases goes down disinflation. That would actually be another way to reiterate that inflation is transitory, as, as we see, disinflation come, which that would be perfect because we know eventually that will drag the top line number down so bottom line out of all of this.

In my opinion, this report is probably going to be a big fat by the dip if it comes in bad. If it comes in normal, it's going to be a big, nothing burger until the fed meeting, and it wouldn't surprise me to see some other big red days before the fed meeting uh and given what the fed has already told us. I see those by the diva opportunities if you want to know exactly what i'm buying the dip on, of course, make sure to check out the programs linked down below on building your world and folks, we'll see you next one thanks. So much bye,.

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